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The semiconductor industry has been on a remarkable run, fueled by the insatiable demand for advanced chips to power artificial intelligence (AI), cloud computing, and cutting-edge technologies. This has sent the stock prices of top semiconductor companies through the roof, and now everyone's talking about potential stock splits to make their shares more affordable for everyday investors.
That's because Nvidia (NVDA), the AI computing powerhouse, recently announced a 10-for-1 stock split, and it's got everyone buzzing. After its latest blowout earnings report, Nvidia's shares are now trading well above $1,100 each - a hefty price tag for most retail investors! The split aims to attract a wider range of investors, and increase the stock's liquidity in the process.
Naturally, this move by Nvidia has sparked speculation about which other high-priced stocks might follow suit with stock splits of their own. Within Nvidia's own semiconductor stomping grounds, Lam Research Corporation (LRCX), at around $950, has already approved its own 10-for-1 split. Elsewhere in the group, some other potential candidates include Broadcom Inc. (AVGO), currently trading above $1,300 per share, and ASML Holding N.V. (ASML), currently near $960.
Interestingly, neither of these companies have split their stocks in over a decade, but their high share prices could make them prime candidates. So, as the semiconductor industry keeps riding this AI-driven growth wave, the burning question might not be if, but when, these giants will pull the trigger on their own stock splits.
Let’s delve deeper into these stocks and see what else they have to offer investors.
Semiconductor Stock #1: Broadcom
Broadcom Inc. (AVGO) is a major player in the semiconductor industry, known for its wide range of semiconductor and infrastructure software products. At current levels, it's also one of the priciest stocks in the Nasdaq-100 Index ($IUXX).
The company's market cap is $644.5 billion, and its stock price is up 22.3% in 2024. AVGO boasts a 52-week gain of 68%, easily outperforming the broader market, and the tech giant offers a dividend yield of 1.51% at current levels.
Broadcom hasn't split its stock since a 2-for-1 split back in April 2010. Since then, the stock has skyrocketed, thanks to its strong performance in sectors like networking, data centers, and AI.
Financially, Broadcom is doing great. In the first quarter of fiscal 2024, it reported earnings of $11.96 billion, up 34% from the previous year. Its non-GAAP net income was $5.25 billion, with a non-GAAP diluted EPS of $10.99. The company also announced a quarterly dividend of $5.25 per share. The recent acquisition of VMware has boosted its revenue in the infrastructure software segment.
Adding to the stock-split speculation is the fact that Broadcom's CEO, Hock Tan, recently topped the Wall Street Journal’s rankings as the highest-paid CEO in corporate America, with $161 million in stock-based compensation. This compensation package is tied to specific performance metrics, including the stock price hitting a designated mark by 2025. This creates a strong incentive for Tan to consider a stock split to make the shares more accessible and potentially drive up the stock price.
Analysts are optimistic on Broadcom, with an overwhelming majority rating the stock as a "strong buy." The mean target price of $1,528.55 indicates expected upside of about 12%.
Semiconductor Stock #2: ASML Holding N.V.
ASML Holding N.V. (ASML) is a Dutch multinational specializing in photolithography systems for the semiconductor industry, boasting over 85% market share in the high-end lithography market.
The stock has delivered remarkable returns, with its share price increasing by more than 1,500% since its last stock split in 2007. This impressive performance has made ASML one of the most valuable companies in the semiconductor sector, as well as the largest tech company in the Netherlands by far.
Year-to-date, ASML has gained 27%, outperforming the wider Nasdaq-100 by a wide margin. The stock offers a dividend yield of 0.78%.
Given the currently high share price, there is speculation that ASML might consider another split. ASML's financial performance has been impressive, driven by the strong demand for its cutting-edge lithography systems - but in light of the high expectations for AI stocks, investors have tended to sell the company's earnings reports.
In the first quarter of 2024, the company revealed net sales of $5.78 billion and a net profit of $1.31 billion. ASML's earnings per share (EPS) for the quarter stood at $3.39, outperforming the average analyst projection of $3.11.
Despite a year-over-year decline in net sales and net income, ASML maintained its full-year outlook, with management expecting stronger performance in the second half of 2024. For Q2 2024, ASML forecasts net sales between $6.21 billion and $6.76 billion, with a gross margin of 50% to 51%.
The company is the sole manufacturer of extreme ultraviolet (EUV) lithography systems, which are critical for producing the most advanced and densely packed chips at the 5nm and 3nm process nodes. Despite geopolitical challenges, such as export restrictions to China, ASML remains confident in its ability to navigate these hurdles and continue its growth trajectory.
Analysts are all in on ASML, with 15 out of 18 giving it a resounding "strong buy" and the other 3 playing it safe with a "hold." The mean target price of $1,081.86 suggests a potential upside of nearly 12%.
The Bottom Line on Semiconductor Stock Splits
Nvidia's stock split has set the stage for similar moves by other tech and semiconductor giants, starting with Lam Research. Broadcom and ASML are both strong contenders to be the next semiconductor stock to split - but even if they don't, investors might want to consider these semiconductor stocks anyway, based on their impressive financials and growth potential.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
